Sony to combine PlayStation and group chip operations

First up: PS2-on-a-chip

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Sony is to unify its diverse chip development and production operations into a single business in a bid to turn the company into a semiconductor powerhouse.

The new business' first offering will be a combination of the PlayStation 2's Emotion Engine CPU and the console's graphics processor on a single 53.5 million transistor chip, according to an EE Times interview with the operation's chief, Ken Kutaragi.

Kutaragi is, of course, the guy who spearheaded the development of Sony's original PlayStation and that console's successor. Today, he's the big cheese at Sony Computer Entertainment and one of the company's key players. SCE has long established its own chip development strategies and staff, many of whom are now working on the Cell chip in co-operation with IBM and Toshiba, Sony's long-time LSI fabrication partner.

Kutaragi has effectively pulled Sony's other semiconductor operations into that SCE framework. The goal is to allow Sony to develop the leading-edge chip solutions it needs going forward more cheaply than if the group's various member companies maintain their own semiconductor operations. Amortising costs this way should make it more cost-effective to invest in more advanced process technology.

Indeed, Sony intended to invest ¥200 billion ($1.7 billion) developing a 65nm process and building a 300mm wafer fab. The next-generation PlayStation 2 part, dubbed the EE+GS@90nm, will as its name suggests be fabbed at 90nm.

Such a part will also provide Sony's PlayStation 3 with cheap PS2 backwards compatibility.

Advanced process technology will be used as a differentiator to sell Sony-developed chips to other companies. Again, that's about reducing the cost to Sony's own businesses, including its Broadband Networks Company (BBNC), which will soon announce a machine based the EE+GS@90nm.

It's also about widening the company's chip development horizons. Having to cater for other group companies' and third-party needs should ensure development doesn't become too tightly focused on the requirements of the PlayStation business. Competing in the open market may further stimulate innovation.

The move comes hot on the heels of Sony's 24 April announcement of lower-than-expected earnings for its most recent fiscal year. Its ¥115.5 billion ($948 million) net profit was better than that previous year's, but still more than 33 per cent lower than Sony had forecast, thanks to a ¥111 billion Q4 loss driven by a 12 per cent drop in sales.

It's no wonder that controlling costs without losing technology leadership is at the forefront of Sony executives' minds.

Sony's troubles arise from its consumer electronics business. Kutaragi's plan to unify chip development is geared toward the development of a broader range of applications from a smaller number of platforms. That may help increase margins in the consumer electronics division - now under one per cent - but more importantly it will help Sony develop new consumer applications and devices to reduce its reliance on and perhaps ultimately replace traditional consumer electronics kit. ®